Sanchez Energy notes tank as strategic alternatives explored; Mallinckrodt issues crash on spinoff news

By James McCandless

San Antonio, Dec. 6 – A day after the Wednesday market closure for the national day of mourning in the United States, the distressed space ended the Thursday session weaker.

Sanchez Energy Corp.’s notes tanked after the company announced late Tuesday that it had hired financial advisers to help with a strategic alternatives review.

Elsewhere in the space, a negative day for oil futures led to concurrent declines in issues of California Resources Corp., Ensco plc and Bristow Group Inc.

In the medical sector, Mallinckrodt plc’s paper saw a steep decline after the company announced that it would spinoff its generics business.

Meanwhile, in retail, L Brands Inc.’s notes were mixed after the company posted favorable November sales figures.

Sector peer Revlon Inc.’s notes were also mixed, while Neiman Marcus Group Inc.’s paper traded down.

Telecom name Digicel Group Ltd.’s issues were falling amid news of the appointment of a new chief financial officer.

Sanchez Energy drops

Sanchez Energy’s notes cratered, traders said.

The 6 1/8% notes due 2023 dropped 6¼ points to close at 20 bid. The 7¾% notes due 2021 lost 8 points to close at 23 bid.

After the close on Tuesday, the Houston-based independent oil and gas producer announced that it had hired Moelis & Co. LLC as financial adviser as it conducts a strategic alternatives review.

“They’re pretty much done,” a trader said. “They’ll likely go for a full-fledged restructure, and the unsecured bonds will be zeroed out.”

The company’s notes have been moving steadily southward amid financial difficulties highlighted in quarterly reports, missing earnings and production targets.

Elsewhere in the energy space, a decline in oil futures led to losses in other energy tranches.

Los Angeles-based peer California Resources’ issues slid.

The 6% notes due 2024 fell 2¾ points to close at 71¼ bid. The 8% notes due 2022 shed 4 points to close at 75½ bid.

London-based contract driller Ensco’s 7.2% paper due 2027 shed 3¼ points to close at 78¾ bid. The 7¾% paper due 2026 traded down 3 points to close at 81 bid.

Houston-based offshore air services name Bristow Group’s 6¼% notes due 2022 fell ½ point to close at 47½ bid.

At the Thursday close, West Texas Intermediate crude oil futures settled at $51.49 per barrel after a $1.40 loss. North Sea Brent crude fell $1.50, ending at $60.06.

Mallinckrodt down

In the medical space, Mallinckrodt’s issues fell, market sources said.

The 4¾% notes due 2023 lost 6¾ points to close at 76¾ bid.

The Staines-Upon-Thames, U.K.-based drug maker announced early Thursday that it would spin off its specialty generic drug segment to shareholders by the second half of 2019.

While making the announcement, the company said it would still be open to selling the unit before then.

The new entity is expected to retain the Mallinckrodt name while the other business will be renamed.

L Brands mixed

In retail, L Brands’ paper saw mixed activity, traders said.

The 6¾% paper due 2036 rose ¾ point to close at 85 bid. The 5¼% paper due 2028 shaved off ¼ point to close at 88½ bid.

The Columbus, Ohio-based retailer reported sales figures for November on Thursday morning, showing a 9% increase in same-store sales at $1.596 billion.

“Their numbers were alright,” a trader said. “Victoria’s Secret showed only a 2% increase so that continues to be the troubled brand that they’re trying to fix.”

Elsewhere, New York City-based cosmetics producer Revlon’s notes were also mixed.

The 5¾% notes due 2021 picked up ¼ point to close at 81¼ bid. The 6¼% notes due 2024 lost 1½ points to close at 57 bid.

Dallas-based luxury retailer Neiman Marcus’ 8% notes due 2021 dropped 1½ points to close at 49 bid.

The company is working to come to a restructuring agreement with its creditors, though talks have recently stalled over the proposed private equity transfer of e-commerce segment MyTheresa.

Digicel off

Digicel’s paper also ended the session worse off, market sources said.

The 8¼% paper due 2020 shed 1¼ points to close at 70½ bid. The 7 1/8% paper due 2022 lost 1½ points to close at 56½ bid.

On Thursday, David Lomas was appointed chief financial officer of the Kingston, Jamaica-based mobile phone network provider.

The company’s paper has been under scrutiny of late after it announced amended exchange offers for the 2020 and 2022 notes.

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